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Opening a Business in Mexico

There are many parties to interact with when opening a business in Mexico

When opening a business in Mexico there are certain requirements and legal procedures that must be complied with. This article briefly points out some of the governmental authorities that are involved in the process of business start-up. When considering this information, it is important to remember that under the shelter program model of initiating manufacturing operations in Mexico most interaction government regulatory entities is undertaken by the shelter service provider.

The Ministry of Foreign Affairs

The Ministry of Foreign Affairs (SRE), through the General Directorate of Permits and Article 27 of the Mexican constitution authorizes the creation of a company. To open a business in Mexico it is necessary to establish and register its name. The SRE is responsible for making sure that the name has not already been utilized by another party.

Public Notary/Public Registry of Commerce

Opening a business in Mexico is formalized through a contract called a “constitutive writing.” This document establishes the rules and requirements under which a business will operate. Among the informational items contained therein are:

General information regarding the partners to the endeavor;

The purpose of the corporation;

Company name;

Information regarding the time during which the company will operate;

Amount of capital invested

The contract referred to as “the statutes,” must be in writing and notarized. Following notarization, the company must be registered with the Public Registry of Commerce (SECOFI).

Ministry of Finance and Public Credit

Within a month after opening a business in Mexico, the company must be registered in the Federal Register of Taxpayers with Mexico’s Ministry of Finance and Public Credit, or “Hacienda.” Hacienda is the Mexican equivalent of the IRS in the United States.

Municipal Government

When opening a business in Mexico, certain activities require that an operating license be issued by the municipal government of the locale in which the activities will be conducted. This operating license must be kept in sight. Also, some municipalities, including the Federal District, require that a Land Use Permit be issued.

Mexican Social Security Institute

When opening a business in Mexico, the employer must register all workers with the Mexican Social Security Institute within a period of five days. The employer’s activities will be classified by the IMSS according to the Regulation of Classification of Companies. This is done to determine the “risk factor” associated with the activities that the company will perform.

Banking Institutions

When opening a business in Mexico companies must select a banking institution through which it will conduct its financial transactions. Through this bank account payment of all taxes will be made, as well as payment for all services utilized such as telephone, electricity, and gas. In addition to registering with the IMSS, companies in Mexico must register with the Savings System for Retirement. Deposits of workers’ retirement fund must be deposited into a special account for this purpose on a bi-monthly basis.

Mexican Business Information System (SIEM)

When establishing a business in Mexico, factories must register with the SIEM in accordance with the Law of Business Chambers and their Confederations. The SIEM provides business with tools to find suppliers, to increase sales and to find potential customers. It also provides support to businesses in that it provides information about public sector procurement programs.

Coparmex, or Federation of Employers of the Mexican Republic

The Employers Confederation of the Mexican Republic (COPARMEX) is a voluntary membership business organization, looking through representation in the workplace and society. Its more than 36,000-member companies across the country are responsible for 30% of GDP and 4.8 million formal jobs

Even though, when establishing a business in Mexico, unionization is not required by law, entities of over twenty workers can be unionized.

Establishing a business in Mexico: National Institute of Statistics

Upon establishing a business in Mexico, and subsequent years thereafter, certain information regarding the business must be provided to the National Institute of Statistic or, as it is known by its Mexican acronym, INEGI.

Establishing a business in Mexico: Secretary of Commerce and Industrial Development

Another governmental organization with which parties that are establishing a business in Mexico must engage is the Secretary of Commerce and Industrial Development (SECOFI). Among SECOFI’s responsibilities is the verification and authorization of all equipment dealing with weights and measures. SECOFI also registers and regulates the Official Mexican Standards or NOMS. NOM registration for certain products is obligatory. Among them are measuring and testing equipment, clothing, footwear and healthcare products. Additionally, SECOFI is the government entity that records trademarks, trade names, patents and other forms of industrial property.

Other entities which also interface with those establishing a business in Mexico include the Secretary of the Environment, Secretary of National Resources and Fisheries, the Ministry of Labor and Social Security, and the National Water Commission among others.

Remember, that under shelter program business model for manufacturers, most of the interaction with the above mentioned organizations and entities is undertaken by the shelter service provider.

“The Tecma Group of Companies' services allow me to concentrate on making and selling wood pallets. I have Tecma handle all administrative functions, Mexican Customs, human resources, all permitting, as well as the legal aspects of manufacturing in Mexico. It’s a very good, complementary relationship. They provide me with a project manager, which means I don’t have to deal with a lot of individuals. I deal with one individual, who then deals with experts in all relevant disciplines on my behalf.”

“When we purchased the Dashmat product line, which is the product that we are manufacturing in Ciudad Juarez, we were able to establish a Mexico manufacturing plant with Tecma very quickly. They got us up and running very smoothly under their Mexico Shelter Manufacturing Partnership (MSMP). We like Tecma because it is a stable company that has been around for many years, and looks to be around for many more. Tecma appears to care about our Mexico business' success is very responsive to our needs.”

“Since we started, we have been able to maintain a competitive advantage over many of our competitors that have moved their manufacturing to China by reducing lead times to 4 weeks less than most of our competitors. This has given us the ability to compete on pricing against many of our competitors that have gone to China. We found that in our Juarez staff in Mexico we found a highly-trained workforce with strong background, and the capability to do mannequin manufacturing in Mexico.”

“More than a decade ago, Portage Electric Products Incorporated was faced with the reality that we were going to have to consider manufacturing in another country in order to maintain our competitiveness in the global marketplace. We chose Mexico, as we could be here literally within hours, should the need arise. We chose the Tecma Mexico Shelter Manufacturing Partnership (MSMP) because it provided virtually everything we needed to begin with and support an ongoing Mexico manufacturing operation.”

This quarterly publication will be populated with content that is useful and relevant to readers that are contemplating Mexico investments, have operations already within the Republic, as well as to other individuals that have an interest in Mexico and its manufacturing sector.